NEW DELHI (Reuters) - Mr Nitish Kumar, the chief minister of India's big northern state Bihar and once seen as a potential challenger to Prime Minister Narendra Modi, quit on Wednesday (July 26) in a move that could shake up national politics.

The abrupt resignation followed a falling out with Mr Kumar's coalition partner, Mr Lalu Prasad Yadav, following raids by India's Central Bureau of Investigation (CBI) on Mr Yadav and his family, and torpedoed a state alliance that dealt Mr Modi's nationalist party a rare regional defeat in an election less than two years ago.

"The situation is such that it is impossible to work any more," Mr Kumar said into a scrum of TV cameras after tendering his resignation to the regional governor in the state capital, Patna.

The row centred around the role of Mr Yadav's son as a regional minister, but its political ramifications could be far broader.

Mr Kumar's grand alliance was seen by some leaders of India's political opposition as a possible template to challenge Mr Modi at the 2019 national vote.

It was not immediately clear whether Mr Kumar's resignation would trigger an election in the northern state or whether indeed he might team up with Mr Modi's Bharatiya Janata Party (BJP), which is the main opposition party in the state legislature.

In a volley of tweets, Mr Modi praised Mr Kumar for fighting corruption, saying that India's 1.25 billion people "welcome and support his honesty".

"It is the need of the country and the present times, to rise above political differences and fight as one against corruption, for a prosperous future of the country - especially Bihar," Mr Modi said, before huddling with BJP leaders.

A senior minister in Mr Modi's government, reacting to the announcement, held out the possibility that the BJP would help keep Mr Kumar in power in Bihar, home to more than 100 million people, but stopped short of saying this would happen.

"It was an unnatural alliance, it was not an alliance of ideological similarity or political understanding. It was an alliance of fear, fear of BJP," Law Minister Ravi Shankar Prasad told reporters in New Delhi, referring to the fall of the Bihar state government.

Mr Kumar served as a minister in the last BJP-led government more than a decade ago. "We still have good relations with him,"said Mr Prasad.

On paper, the votes of Mr Kumar's regional JDU party and Mr Modi's BJP would secure a narrow majority in the Bihar state legislature.

If the BJP joins the state government that would ultimately boost its strength in the Upper House of the federal Parliament, making it easier for Mr Modi to push his reform agenda.